Government Intervention in National Markets
Government intervention in national markets.
Angola is one of those countries that is full of such examples. It is also full of contradictions and inefficiencies that dictate that more than often these interventions are only temporary on not fully abided by.
Angola 's socialist turned capitalist market is full of such regulated areas where government intervened directly much to the disarray of the market. I can remember a time when you couldn 't import tires into the country because Mabor the country 's tire producing factory had the monopoly of the tire market. If a private company wanted to import tires they had to require an authorization from Mabor, which would result more than often in it being denied, or a request for a commission on the import wasn 't uncommon either.
This continued for a good while even after Mabor stopped producing until the law was eventually revoked and companies are now able to import tires at will, but this law must be less than 2 to 3 years old (!!) as I had a friend who had a run in with the law because of a container full of tires which didn 't have the authorization from Mabor to enter the country.
The Major Objectives of Government Intervention
Generally speaking governments intervene in the market for two main reasons: "social efficiency and equity". [1] One does not expect to see a government intervene in the economy to favor a firm, or because the government would profit from such an intervention in the way a firm sees profit (except maybe voters positive perception of the intervention).
Social efficiency is related to the concept of the government intervening in a situation where the costs pertaining to a firm or a number of firms acting in a specific way is higher that its benefits. One might want to say for correctness purposes that one achieves social efficiency when "the marginal benefits to society - or marginal social benefits (MSB) of producing any given good or service exceed the marginal costs to
Angola is one of those countries that is full of such examples. It is also full of contradictions and inefficiencies that dictate that more than often these interventions are only temporary on not fully abided by.
Angola 's socialist turned capitalist market is full of such regulated areas where government intervened directly much to the disarray of the market. I can remember a time when you couldn 't import tires into the country because Mabor the country 's tire producing factory had the monopoly of the tire market. If a private company wanted to import tires they had to require an authorization from Mabor, which would result more than often in it being denied, or a request for a commission on the import wasn 't uncommon either.
This continued for a good while even after Mabor stopped producing until the law was eventually revoked and companies are now able to import tires at will, but this law must be less than 2 to 3 years old (!!) as I had a friend who had a run in with the law because of a container full of tires which didn 't have the authorization from Mabor to enter the country.
The Major Objectives of Government Intervention
Generally speaking governments intervene in the market for two main reasons: "social efficiency and equity". [1] One does not expect to see a government intervene in the economy to favor a firm, or because the government would profit from such an intervention in the way a firm sees profit (except maybe voters positive perception of the intervention).
Social efficiency is related to the concept of the government intervening in a situation where the costs pertaining to a firm or a number of firms acting in a specific way is higher that its benefits. One might want to say for correctness purposes that one achieves social efficiency when "the marginal benefits to society - or marginal social benefits (MSB) of producing any given good or service exceed the marginal costs to
References: [1] Sloman J. and Sutcliffe M., Economics for Business 3rd Edition, page 401, paragraph 1 [2] Sloman J. and Sutcliffe M., Economics for Business 3rd Edition, page 401, paragraph 2 [3] Sloman J. and Sutcliffe M., Economics for Business 3rd Edition, page 402, paragraph 4 [4] Ministério das Finanças, Decreto Executivo nº 34-00 26-06-2000, [internet] Accessed on: 19th November 2005, http://www.minfin.gv.ao/leg/adu/adu.htm [5] Crown Agents, Building Partnerships between Business and Government - Commission For Africa, [internet] Accessed on: 19th November 2005, http://www.crownagents.com/news/news.asp?step=4&NewsID=648